Wolfowitz walks, leaving pressing
problems By Emad Mekay
WASHINGTON - The resignation of World Bank
president Paul Wolfowitz has emboldened critics of
the institution's governance structure, who are
clamoring for an overhaul of not only the bank but
its sister organization, the International
Monetary Fund (IMF).
Wolfowitz, who has
been fending off accusations of favoritism and
nepotism at the Washington-based institution, will
resign effective June 30, the first president of
the institution ever to be forced out.
"The executive directors acknowledge
Wolfowitz' decision to resign as president of the
World Bank Group, effective end of the
fiscal year (June 30, 2007),"
the 24 bank directors, who ran the institution's
day-to-day affairs with Wolfowitz during his
two-year tenure, said in a statement late
Thursday.
The directors appear to have
given Wolfowitz the graceful exit he has been
fighting for and accepted, though not so warmly,
his request that he resign in return for their
acknowledgement that he was not the only person at
fault in the controversy.
In their
statement, the directors said that the episode,
which started seven weeks ago with leaks revealing
that Wolfowitz had engineered a generous promotion
and salary increase for his girlfriend, fellow
bank employee Shaha Riza, that did not conform to
bank regulations, showed that the bank's
governance system needed urgent repair.
Many outside observers agreed. "The
scandal surrounding Paul Wolfowitz has exposed
systemic problems in the way the World Bank is
run," said Bruce Jenkins of the Bank Information
Center, an independent watchdog group in
Washington.
Despite his initial public
apology, Wolfowitz has lately maintained that the
bank's ethics committee also erred by not being
clear in its directions and guidelines.
"One conclusion we draw from this is the
need to review the governance framework of the
World Bank Group, including the role as well as
procedural and other aspects of the ethics
committee," said the directors. "It is clear from
this material that a number of mistakes were made
by a number of individuals in handling the matter
under consideration, and that the bank's systems
did not prove robust to the strain under which
they were placed."
The directors said they
would continue discussion on arrangements for the
interim period as well as the governance issues.
They also said they will start the nomination
process for a new president immediately.
In his own statement, Wolfowitz, 63, who
came to the bank from the Pentagon in June 2005,
said he was pleased the directors had consented
that he "acted ethically and in good faith". He
also sided with the directors in calling for
reform of the bank's governance system.
"Hopefully the difficulties of the last
few weeks can actually strengthen the bank by
identifying some of the areas of governance and
human-resource management where reform is needed,"
Wolfowitz said in a lengthy statement, in which he
reviewed his work during his two-year tenure.
Wolfowitz became entangled in controversy
seven weeks ago after World Bank whistleblowers
leaked to the Washington-based non-governmental
organization Government Accountability Project
(GAP) several documents that showed Wolfowitz
pushing a high pay raise in a secondment deal to
the US State Department for his girlfriend, which
he claimed did not violate the bank's code on
conflicts of interest.
The following days
and weeks saw Wolfowitz, once the high-riding No 2
man at the Defense Department and a leading
architect of the ill-fated Iraq war, trying to
cover up the controversy before eventually making
a humiliating public admission that he had made a
"mistake".
Calls from the bank's staff,
senior management and officials from across the
world poured down on the bank for Wolfowitz to
quit. The nepotism charges added fuel to an
internal simmering revolt over the conduct of his
close aides and the more-than-generous pay they
were getting.
The World Bank, which
critics have long accused of getting away with
harmful policies and practices in developing
nations away from the gaze of the media, now
received unprecedented media attention because of
the evolving controversy.
"There was no
way Wolfowitz could have continued on as World
Bank president. He and his associates have been
caught repeatedly misleading bank staff and the
media. His credibility was shot," said Dylan
Blaylock of GAP.
The resignation
announcement quickly rekindled calls for fixing
the "real problem" at the World Bank - namely its
governance structure.
"While his
resignation is a step in the right direction, one
must ask: How did a senior Pentagon official in
charge of orchestrating a disastrous war become
the leader of the world's premier development
institution in the first place, and why did the
bank's board of directors fail to adequately
oversee the actions of the institution's chief
executive?" said Jenkins.
"The recent
furor around Mr Wolfowitz' actions calls into
stark relief the need for the bank to swallow its
own medicine and to structurally adjust how it is
governed or risk deepening its crisis of
legitimacy."
Since the World Bank was
established in the 1940s, the US government has
designated its president without consulting other
member nations, while European governments
designated the managing director of the IMF.
"After 63 years it is time to have open,
merit-based selection of these leaders," said Jo
Marie Griesgraber, executive director of the New
Rules for Global Finance Coalition.
"The
Wolfowitz scandal is but a natural consequence of
the 'old boys' club' way in which the World Bank
and IMF have been governed. It provides an
opportunity to end the anti-democratic behavior of
the world's great democracies, whereby the US
president names the World Bank president and a
small coterie of European finance ministers name
the IMF managing director," she said.
The
international development group Oxfam, which had
quickly joined in the call for Wolfowitz' ouster,
said the next move falls on the shoulders of the
rich nations that control the World Bank - the
United States and European nations.
"The
US and other rich countries must now show that
they are serious about good governance by allowing
the next head of the bank to be appointed based on
merit through an open, accountable process," said
Bernice Romero, advocacy director of Oxfam
International.
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